Tax-free municipal bonds might not be so free if Romney becomes presidents

By Dian Vujovich

The whole world seems to be talking about fiscal cliffs and with good reason—economies around the world aren’t in such hot shape. Even so, when it comes right down to brass tax, it’s avoiding a fiscal cliff of your own that matters most.

Before going down that road, let’s look at how the markets have treated investors.

There’s no need for sugarcoating here, U.S. stocks have enjoyed a few years of great returns for those willing to partake. So no matter what side of the political fence you prefer, the left, right or sitting on top, President Obama’s reign has provided handsome returns to many. When he took office in January 2009, the Dow Jones Industrial Average was around 8200. On September 30, 2012, it closed at 13,473. That’s a sweet upward swing.

But wait, there’s more: Over the past 52-weeks ending 9/30/12, the DJIA gained over 23 percent, the S&P 500 over 27 percent and NASDAQ more than 29 percent.

On the other hand, any wall-of-worry folks who elected to keep their money in savings accounts have had little to show for that choice. With the 10-year Treasury bond yielding around 1.6 percent and the typical savings account returning way way under 1 percent, why anyone would bother with a savings account, when a more liquid spot for those wanting to keep their cash close at hand would be under their mattress, puzzles me. But that’s just me.

Saver-types, however, have poured trillions into savings accounts. At the end of the second quarter, savings accounts held over $6.9 trillion in them. That’s the largest sum the Federal Reserve has seen since 1945 when they first began counting money flows.

That said, going forward the one thing that’s certain is change. Change that will impact everything from our stock and bond markets to tax rates.

According to the Tax Policy Center, heading over a fiscal cliff could cost Americans anywhere from a few hundred dollars more a year in tax consequences to many thousands of dollars depending upon their income level.

While no one knows for sure precisely what tax consequences we will all face in the coming years, simply knowing that the future is about to change means one thing: Now is exactly the time to look at and review your own investment goals and portfolios.

When reviewing, look to see if there are gifting opportunities that would benefit you before year’s end. Or, any buy-sell opportunities, IRA or Roth conversions, bonuses to give or that can be had before year’s end, trusts to form, or wills and estates that need changing.

As always, it’s your money that counts the most. So take some actions today to make sure to avoid a fiscal cliff of your own making.